‘Leave the $100, crims prefer $50s’

THE Reserve Bank has defended the embattled $100 note, saying removing the bill from circulation would do little to stamp out crime — because criminals prefer $50s.

Earlier this week, the government flagged a review of the $100 note and cash payments over a certain value in Monday’s midyear budget update, as it seeks to recoup billions in unpaid tax lost to the cash economy.

Revenue and Financial Services Minister Kelly O’Dwyer questioned why there were so many $100 notes in circulation, and would not rule out a removal of Australia’s highest-denomination banknote.

“The whole point of this crackdown on the black economy is to make sure we close down any potential loopholes,” Ms O’Dwyer said.

But the RBA has backed the $100 bill, pointing out that it was “not possible to estimate the extent to which cash, or any particular banknote denomination, is used in illegal activities”.

“However, liaison with AUSTRAC (Australian Transaction Reports and Analysis Centre) and the Australian Crime Commission suggests that it is the $50 denomination — rather than the $100 — that tends to be preferred by criminal elements because of its ubiquitous use in legitimate transactions,” the RBA wrote.

“This suggests that to the extent that the $100 banknote is being used for nefarious purposes, any phase-out may not be particularly disruptive to those engaged in such activities.”

There are currently around 1.5 billion banknotes in circulation worth $73 billion, with $50 and $100 notes accounting for around two thirds. The RBA says the overall demand for cash increased by 6 per cent in the year to November, and demand for $50s and $100s has grown at a faster rate than lower denominations in recent years.

The RBA said that “contrary to some claims”, high-denomination Australian banknotes are used in a significant number of legitimate transactions.

“For example, sampling by the Reserve Bank suggests that $100 banknotes account for up to 5 per cent of the cash banked by retailers and supermarkets, and 10 per cent for post offices, likely reflecting the payment of some household bills,” the RBA wrote.

“While these figures do not represent the chance of a particular denomination being used in any given transaction, they indicate continued transactional use of the $100 banknote at a range of retailers.”

Despite the rapid growth in electronic payments, the most recent detailed data on the use of cash for consumer payments from a 2013 RBA survey showed cash was “still the most frequently used payment method for consumer transactions”.

“Although its use had been declining relative to other payment methods, particularly electronic ones, for a number of years,” the survey stated.

“Cash is used more often for smaller transactions, with participants in the 2013 survey using cash to make 69 per cent of payments (by number) worth $20 or less.

“But even for low-value transactions, consumers are shifting to electronic alternatives, most notably contactless cards. By value, cash accounted for 18 per cent of transactions in 2013, compared with 38 per cent in 2007.

“Since 2013, there has been a sustained decline in ATM and point-of-sale debit card cash withdrawals, which is consistent with a reduction in cash use in transactions.”

According to that survey, three quarters of Australians said they held cash in places other than their wallets, with emergency transactions named the most important reason.

“As the role of cash evolves, the Reserve Bank will continue to consider how best to meet the demand for banknotes, in order to ensure that cash is readily available to those who wish to use it,” the report concludes. “In this regard, ensuring appropriate access to cash for citizens who have few alternatives is likely to be a priority.”